A bank is an establishment that receives deposits from people that creates a demand credit and simultaneously makes loans. Lending activities can be performed by the bank and by capital markets.
Banking plays a vital role in financial stability and an economy of a country. Most countries have established fractional reserve banking, in which banks hold liquid assets equal to only a portion of their current accountabilities.
The principal functions of banks are collecting deposits, allowing loans, advances, cash, and discounting bills. Secondary roles are issuing letters of credit, undertaking mortgages for valuables, and providing customer finance, gold loans, and educational loans.
There are three categories of financial depository institutions in the United States namely commercial banks, thrifts, and credit unions.
Digital banking is necessary for today’s digital era. It is the automation of old-style banking services. It allows customers to access banking services via an electronic platform. Digital banking means digitizing all of the banking processes and substituting the actual presence of the bank.
It is done through the digital platform, doing away with all the paperwork like cheques, pay-in slips, and Demand Drafts. It simply means accessibility of all banking activities online.
Types of Digital banking payments
Debit, visa, and credit cards are used to withdraw and deposit money in ATMs. These cards are used for ‘on Point of Sale’ machines.
Mobile Wallets: They have eradicated the need to remember four-digit card pins or carry moveable cash. Mobile wallets, nevertheless, have a boundary on how much amount can go in the wallet. A fee is applicable for the transactions.
PoS terminals: PoS machines are moveable devices that read a card to sanction the payment. Gas stations choose this mode of payment. Today PoS terminals have advanced into more than physical PoS devices. Mobile PoS terminals use the NFC feature to initiate a transaction.
Internet Banking: Internet banking refers to gaining banking services like money transactions, and opening and closing accounts. It is a subsection of digital banking because internet banking only performs principal functions. Likewise, mobile banking is availing of banking services by mobile-based solicitations.
Benefits of digital banking:
Digital banking allows customers to perform banking functions from the comfort of their homes. Transactions have become paperless with the expansion of digital banking services. A customer can log into their account easily to see the transactions. Digital banking permits consumers to set up automatic payments for utility bills like electricity, gas, and credit cards. The customer no longer has to make an effort to memorize the due dates. He can opt for alerts on upcoming payments.
Online shopping has become easy with payment channels integrating with the shopping gateways. Internet banking has meaningfully contributed to online transactions.
A customer can report misdirected cards at the click of a button. It strengthens the privacy of a consumer. Digital banking limits the flow of black money as the Government can keep a record of fund transfers.
In the coming years, digital banking will lessen the minting demands of cash. The mentioned advantages state that the usage of digital banking is growing day by day as it saves time. In 2022 and the coming future, we can expect the growth of digital banking in businesses.